Senate approves extension to payday loan repayment periods

Those hoping to reform the payday lending industry marked down a win Thursday when the Senate passed a hotly debated bill that would extend the repayment period for the typical payday loan, giving borrowers more time to repay their loan without racking up excessive interest.

The move will effectively cut the annual percentage rate from 456 percent down to a 220 percent APR, said the bill’s sponsor Sen. Arthur Orr, R-Decatur.

The typical cash-advance loan in Alabama currently has a repayment period of 14 days, though some are as short as 10 days, giving those who choose to take out one of the short-term loans two weeks — modeled after the standard pay period — to pay back the money they borrowed.

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The new bill will set a minimum repayment period of 30 days.

“It’s just to extend the loan term, like your car loan, like your credit card payments, like your mortgage payments, on a 30-day track,” Orr said. “People are used to a 30-day cycle for all of the other short-term debts that they have and their long-term debts. It’s certainly something that will be more manageable for consumers.”

Senators approved the measure by a vote of 20-4 after a heated debate between Orr and another Republican who was initially opposed to the bill.

Sen. Tom Whatley, who ended up voting yes on the bill, attempted to filibuster the bill. He said extending the repayment period could cause more loans not to be repaid, in turn hurting payday lenders.

“I firmly believe that the idea is to drive this lending source out of business through government regulation,” Whatley said.

The Auburn Republicans said the government should focus on reducing the demand for the loans — through education and bettering economic conditions in the state — instead of blocking the loans themselves.

Whatley said many of those who are against payday lenders really just want to get rid of the storefronts.

“If it was a lending institution that was in a nice, pretty 20-story building, then it wouldn’t be as much of an issue,” Whatley said. “If you don’t solve the demand, there is still going to be a lender of last resort.”

Those in need of the money typically have already exhausted other forms of credit, if they were able to get it at all, and will find other ways to get a loan if they can’t find a payday lender, Whatley said.

“All it does is shift it to overseas lending. It shifts it to people who are not tracked by the state of Alabama, they’re not authorized lenders, but they do lending,” Whatley said. “Those people don’t do interest rates, they charge an arm and a leg, a literal arm and a leg.”

Despite Whatley’s concerns, Orr said he didn’t believe payday lenders would go out of business.

“You look at a state, like Maine or Colorado, states that have lower APR rates, and they’re still in business. They’re still thriving. They still have thriving payday-lending-type businesses,” Orr said.

The vote to pass the bill was overwhelming but a series of confusing parliamentary maneuvers followed.

After the bill passed, Orr moved to reconsider the previous vote on the bill, a motion he knew would fail. Right after moving to reconsider, Orr moved to table his own motion, which would have effectively blocked the bill from being reconsidered later in the session.

Several of those who voted on yes on the bill apparently only voted yes so they could have the ability to call for the bill to be reconsidered later. Senate rules require that only someone who voted on the prevailing side of the bill can call for the vote to be repeated. At least seven of those who voted yes would go on to vote for the motion to reconsider, ostensibly meaning that they wanted a second vote.

The motion to table failed but the subsequent vote on the motion to reconsider also failed by a vote of 13-13 with President Pro Tem Del Marsh breaking the tie. With that, the Senate was blocked from reconsidered the bill before it was sent to the House for their input.

The average payday borrower is in debt for five months out of the year and spends upward of $500 in fees to repeatedly borrow about $375 at a time. The average fee for a storefront loan is $55 per two weeks, though they range from $17.50 to $100 and the costs can quickly increase as interest builds on unpaid loans.

Opponents say the practice amounts to usury and predatory lending while those who back the industry content that payday lenders provide a needed alternative to those who can’t get more standard lines of credit.

Orr said his bill will give borrowers more of a chance to repay their short-term loans without getting caught up in a never-ending debt cycle, something for which the payday lending industry has been harshly criticized for.

Existing law caps the total amount of loans an individual can borrow from a payday lender at $500.

“It will give them longer to pay, but there will also be fewer loans available if they stay below the $500 cap,” Orr said.

But Orr said his bill wouldn’t really change the number of loans the average borrower takes out a year. The average borrower takes out eight to nine loans a year, according to the Center for Responsible Lending.

In Alabama, the current APR is capped at 456 percent, far higher than the standard interest rates for car loans, mortgages and even other short-term loans like those covered by the Alabama Small Loans Act, which caps interest rates at 3 percent per month or an annual percentage rates of 36 percent.

Orr said many in his constituency would like to see payday loans banned, but he won’t go that far.

“I don’t want to go there. I won’t go there,” Orr said. “I think that is a place for quick loans, available loans for those that need them. However, when you see the interest-on-interest payments and the overall interest rates on the rollovers when you get over 400 percent. Those are huge numbers, and they really cause people fiscal stress to be able to repay them.”

Moving to the House

The bill now heads to the House of Representatives, a place where recent payday loan reform bills proposed in recent years went to die.

“We’re halfway there but the probably more difficult mountain to climb lies ahead,” Orr said. “The House committee has been pretty much the Bermuda Triangle, the place where any payday lending reform bill does not exit from.”

Orr’s bill this time around is a far cry from a bill passed by the Senate two years ago that would have given borrowers up to six months to repay their loans. That bill, which was modeled after similar legislation in Colorado, died in the House.

Alabama House Speaker Mac McCutcheon, R-Monrovia, said Thursday that he isn’t too optimistic about the bill’s future and that the mood in the House for payday lending reform hasn’t changed in recent years.

“There’s no doubt it will be a very healthy, heated debate if the bill makes it through the committee and gets to the floor,” McCutcheon said. “I’m encouraging the committee to be very open and honest with their debate.”

McCutcheon said the House would attempt to craft the bill into something that suits payday lenders while protecting consumers.

“Some people want to completely do away with it,” McCutcheon said. “But I’ve had some people come to me and say, ‘Mr. Speaker, if you take this away, I’m a person the banks will not lend money to, so where do I go and where do I get my help?”

House passes General Fund Budget

The Alabama House of Representatives passed the state General Fund Budget on Tuesday.

The General Fund Budget for the 2019 fiscal year is Senate Bill 178. It is sponsored by Sen. Trip Pittman, R-Montrose. State Rep. Steve Clouse, R-Ozark, carried the budget on the House floor. Clouse chairs the House Ways and Means General Fund Committee.

Clouse said, “Last year we monetized the BP settlement money and held over $97 million to this year.”

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Clouse said that the state is still trying to come up with a solution to the federal lawsuit over the state prisons. The Governor’s Office has made some progress after she took over from Gov. Robert Bentley. The supplemental we just passed added $30 million to prisons.

The budget adds $50 million to the Department of Corrections.

Clouse said that the budget increased the money for prisons by $55,680,000 and includes $4.8 million to buy the privately-owned prison facility in Perry County.

Clouse said that the budget raises funding for the judicial system and raises the appropriation for the Forensic Sciences to $11.7 million.

The House passed a committee substitute so the Senate is either going to have to concur with the changes made by the House or a conference committee will have to be appointed. Clouse told reporters that he hoped that it did not have to go to conference.

Clouse said that the budget had added $860,000 to hire more Juvenile Probation Officers. After talking to officials with the court system that was cut in half in the amendment. The amendment also includes some wording the arbiters in the court lawsuit think we need.

The state General Fund Budget, SB178, passed 98-1.

Both budgets have now passed the Alabama House of Representatives.

The 2019 fiscal year begins on Oct. 1, 2018.

In addition to the SGF, the House also passed a supplemental appropriation for the current 2018 budget year. SB175 is also sponsored by Pittman and was carried by Clouse on the floor of the House.

SB175 includes $30 million in additional 2018 money for the Department of Corrections. The Departmental Emergency Fund, the Examiners of Public Accounts, the Insurance Department and Forensic Sciences received additional money.

Clouse said, “We knew dealing with the federal lawsuit was going to be expensive. We are adding $80 million to the Department of Corrections.”

State Representative Johnny Mack Morrow, R-Red Bay, said that state Department of Forensics was cut from $14 million to $9 million. “Why are we adding money for DA and courts if we don’t have money for forensics to provide evidence? if there is any agency in law enforcement or the court system that should be funded it is Forensics.”

The supplemental 2018 appropriation passed 80 to 1.

The House also passed SB203. It was sponsored by Pittman and was carried in the House by State Rep. Ken Johnson, R-Moulton. It raises securities and registration fees for agents and investment advisors. It increases the filing fees for certain management investment companies. Johnson said that those fees had not been adjusted since 2009.

The House also passed SB176, which is an annual appropriation for the Coalition Against Domestic Violence. The bill requires that the agency have an operations plan, audited financial statement, and quarterly and end of year reports. SB176 is sponsored by Pittman and was carried on the House floor by State Rep. Elaine Beech, D-Chatham.

The House passed Senate Bill 185 which gives state employees a cost of living increase in the 2019 budget beginning on October 1. It was sponsored by Sen. Clyde Chambliss, R-Prattville and was being carried on the House floor by state Rep. Dimitri Polizos, R-Montgomery.

Polizos said that this was the first raise for non-education state employees in nine years. It is a 3 percent raise.

SB185 passed 101-0.

Senate Bill 215 gives retired state employees a one time bonus check. SB215 is sponsored by Senator Gerald Dial, R-Lineville, and was carried on the House floor by state Rep. Kerry Rich, R-Guntersville.

Rich said that retired employees will get a bonus $1 for every month that they worked for the state. For employees who retired with 25 years of service that will be a $300 one time bonus. A 20-year retiree would get $240 and a 35-year employee would get $420.

SB215 passed the House 87-0.

The House passed Senate Bill 231, which is the appropriation bill increase amount to the Emergency Forest Fire and Insect and Disease Fund. SB231 is sponsored by Sen. Steve Livingston, R-Scottsboro, and was carried on the House floor by state Rep. Kyle South, R-Fayette.

State Rep. Elaine Beech, D-Chathom, said, “Thank you for bringing this bill my district is full of trees and you never know when a forest fire will hit.

SB231 passed 87-2.

The state of Alabama is unique among the states in that most of the money is earmarked for specific purposes allowing the Legislature little year-to-year flexibility in moving funds around.

The SGF includes appropriations for the Alabama Medicaid Agency, the courts, the Alabama Law Enforcement Agency, the Alabama Department of Corrections, mental health, and most state agencies that are no education related. The Alabama Department of Transportation gets their funding mostly from state fuel taxes.

The Legislature also gives ALEA a portion of the gas taxes. K-12 education, the two year college system, and all the universities get their state support from the education trust fund (ETF) budget. There are also billions of dollars in revenue that are earmarked for a variety of purposes that does not show up in the SGF or ETF budgets.

Examples of that include the Public Service Commission, which collects utility taxes from the industries that it regulates. The PSC is supported entirely by its own revenue streams and contributes $13 million to the SGF. The Secretary of State’s Office is entirely funded by its corporate filing and other fees and gets no SGF appropriation.

Clouse warned reporters that part of the reason this budget had so much money was due to the BP oil spill settlement that provided money for the 2018 budget and $97 million for the 2019 budget. Clouse said they elected to make a $13 million repayment to the Alabama Trust fund that was not due until 2020 but that is all that was held over for 2020.

Clouse predicted that the Legislature will have to make some hard decisions about revenue in next year’s session.

Day Care bill delayed for second time on Senate floor, may be back Thursday

The day care bill, which would license certain day care centers in Alabama, was once again delayed on the state Senate floor after one lawmaker requested more information.

Its brief appearance Tuesday ended with state Sen. Gerald Dial, R-Lineville, saying a compromise had not yet been worked out with the bill’s detractors.

Alabama’s Senate has been hesitant to act on the legislation because of complaints of state Sen. Shay Shelnutt, R-Trussville, who has been an opponent of the bill since its introduction last year. The bill’s delay on Tuesday marks the second time its been taken off the Senate’s agenda.

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The bill has had a rocky time in this year’s session, but the bill’s sponsor state Rep. Pebblin Warren, D-Tuskegee, said she is still confident about its passage out of the Legislature.

Warren, D-Tuskegee, filed the bill this session with the support of influential lawmakers including Gov. Kay Ivey, who told reporters last year that she though all day cares should be licensed.

Mainly sparked by the death of 5-year-old boy in the care of a unlicensed day care worker, the bill had great momentum coming into this year’ session.

Despite the growing support from lawmakers, Religious groups had concerns that the bill would increase state-sponsored reach into religious day cares in churches and non-profit groups.

Warren, proponents, and ALCAP announced a compromise to the bill while it was still in the Alabama House.

Announced by ALCAP originally, the new bill was a weaker version in that it did not require that all day cares in the state be regulated. Instead, religious-based day cares would only need to be registered if they received federal funds. At a Senate committee meeting in February, Warren said a similar requirement was about to come from federal law in Congress.

The bill moved through the House in a overwhelming vote in favor of the proposal and passed unanimously out of a Senate committee a few weeks ago.

Warren, speaking to reporters after its passage from the House, said she was unsure if the bill would encounter resistance in the upper chamber.

It was the Senate that killed the daycare bill last year amid a cramped last day where senators took the bill off the floor. The bill may face similar complications this year, as lawmakers seem to be preparing to adjourn within a few weeks.

Speaking to reporter’s after the committee meeting, Sanford said the decision to file the bill was mainly a philosophical belief that the practice shouldn’t be illegal.

Sanford, a fantasy sports player before its ban, said that fantasy sports are a way to bring people closer together and not a means to win money. The Huntsville senator is not seeking re-election.

The bill’s failure in the Senate follows its trajectory last year too. A similar version of the bill, also sponsored by Sanford, failed in the Senate during the final days of the 2017 Legislative Session.

Since Sanford is retiring, it is unclear if the bill will even come back next session, or if it will even have a Senate sponsor.